Revisions in FII Investments in corporate debt long term infra category
Summary
This circular revises the investment limits for Foreign Institutional Investors (FIIs) in corporate debt long-term infrastructure categories following a modification by the Government of India. It establishes two distinct sub-limits of USD 5 billion and USD 17 billion based on specific lock-in periods and residual maturity requirements for bond investments. The document further details the allocation mechanisms, including bidding processes and caps, for these revised infrastructure debt limits.
Text
Government of India vide its press release dated September 12, 2011 modified the aforesaid long term infrastructure limits and thus the following bifurcation of the long terms infrastructure limits of USD 22 billion is advised:-
USD 5 billion is earmarked for FII investments in those bonds that have an initial maturity of 5 years or more at the time of issue and a residual maturity of 1 year at the time of first purchase by an FII. These investments are subject to a lock in period of 1 year wherein FIIs can trade amongst themselves but cannot sell to domestic investors during lock in period.
The remaining USD 17 billion limits available to FIIs can be invested in Long term infra bonds which have an initial maturity of 5 years or more at the time of issue and residual maturity of 3 years at the time of first purchase by an FII. These investments are subject to a lock in period of 3 years wherein FIIs can trade amongst themselves but cannot sell to domestic investors during the lock in period.
Investment by FIIs in infrastructure debt fund schemes under the IDF route shall be reckoned under USD 17 billion as mentioned at para 5 above.
It is to be clarified that as per convention, in case of bonds that have embedded options, such as bonds with put and call options, the date of the put/ call shall be determined as the maturity date for the purpose of calculating residual maturity.
In partial modification of para 6 of the aforesaid circular IMD/FII&C/5/2011 that FIIs/sub-accounts can now avail of the debt limits under the corporate bonds long term infra category which have an initial maturity of 5 years or more at the time of issue and residual maturity of 3 years at the time of first purchase by an FII, without obtaining SEBI approval till the overall FII investment reaches 90% (ninety percent) of USD 17 billion i.e. USD 15.3 billion.
Allocation of entire USD 5 billion limit for FII investments in terms of para 4 above shall be through the bidding process on the NSE from 15:30 hrs to 17:30 hrs, on October 07, 2011, in terms of SEBI circular IMD/FII&C/37/2009 dated February 06, 2009, subject to the modifications stated below:-
no single entity shall be allocated more than INR 2,000 cr. of the investment limit. Where a single entity bids on behalf of multiple entities... then such bid would be limited to INR 2,000 cr. for every such single entity.
the minimum amount which can be bid for shall be INR 50 cr.
The fees for the bidding process shall be remitted to SEBI by the respective custodians of the entities by October 12, 2011.
Source: SecMarx — Revisions in FII Investments in corporate debt long term infra category. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.